Smart Retirement Planning
According to Erin Dooley, a financial advisor for Edward Jones in Moneta, seven out of 10 people are not adequately saving for retirement. It’s a scary statistic. Whether your retirement is five years or five months from now, do you know if you’re ready?
“Eighty percent of what you make now is likely what you’ll need to live on,” Dooley says. “Most people don’t usually plan to change their lifestyles drastically,” but keep in mind that inflation will lessen your buying power over the years.
Websites such as Charles Schwab (schwab.com) and AARP (aarp.org) offer retirement savings calculators to help you find a more accurate account of how much money you will need by crunching the numbers of your current income, how much you are saving annually and how much you plan to spend annually during retirement.
Remember, Dooley says, life expectancy has risen, so you should plan for at least 20-30 years of retirement savings.
It’s never too early to begin mapping out your retirement, Dooley and other financial planners emphasize. Sort through bills, mortgages, social security and retirement plans with a financial planner to determine what you need to do to live a comfortable life in your latter years.
“It’s all about looking at where you are today, where you want to be and how you’re going to get there,” Dooley says. “We recommend meeting annually or semi-annually with an advisor to make sure nothing major has happened in your life that could affect your savings.”
As for investments, Dooley says she doesn’t push a particular type, as the right venture for a person varies by age and how much risk you are willing to take. Start early, and your investment is likely to withstand the ups and downs of the market.
Before the Goodbyes
You’ve announced your retirement and the farewell party at the office is planned. Before you go, don’t forget to consider the options for your 401K.
The Charles Schwab website recommends talking with your employer about arranging a direct rollover of your account balances into an IRA. You also may have the choice of keeping your 401K through your employer. Dooley says rolling over into a Traditional or Roth IRA is ideal because you can keep better track of the funds instead of relying on your former employer.
Preserve Your Assets
Financial planning and estate planning seem to go hand-in-hand. Once you have created a plan for your retirement funds, says Scott E. Gardner, an attorney in Salem, you should consult an attorney to discuss an estate plan.
“It’s never too early to start estate planning,” Gardner says. “All clients needs are unique, and they should customize an estate plan accordingly.”
Terry VandeLinde, president of VIP Planners Inc. says current law allows a person who dies in 2009 to leave up to $3.5 million to their beneficiaries without estate tax consequences. He advises everyone to review their estates, not only for estate tax reasons, but also in case of an unexpected disability or if a person does not have a will.
Attorneys will review investment statements, insurance policies, property titles and other financial documents to ensure an adequate plan is made. After evaluation, attorneys prepare the proper documents, which include a will, trust, power of attorney and living will.
Upon completion (which could take a few days to a few months), clients execute the documents with the attorney. The cost of estate planning ranges from hundreds to thousands of dollars, depending on the circumstances.
Important Questions to Consider
According to Gardner, people should ask themselves the following questions (depending on your personal situation) before making estate plans:
- How will my assets be divided and distributed?
- Do I need long-term care insurance?
- Can I create a trust or make a donation to a charity or university?
- Should I start making gifts to relatives now?
- Who should I appoint as my executor, trustee, guardian?
- How will my debts be paid?
If you have delayed estate planning or are thinking about making changes to your plan, attorneys may require you to undergo an independent medical evaluation to determine your decision-making capacity.
Dr. Gary Oberlender of Roanoke, a consultant in geriatric medicine, offers in-home evaluations for folks facing such situations. The evaluations, according to his website (seniorevaluations.com) include – among other factors – a review of medical history, assessment of general physical health and functional independence, and a mental status examination. Oberlender will prepare a written report of his findings.